CVS starts debt sale to pay for $68B Aetna deal

CVS Health kicked off what’s likely to be one of the largest corporate-debt financings ever as it seeks to fund its $67.5 billion acquisition of Aetna.

The blockbuster deal comes as investment-grade bonds have had their worst start to the year in decades. Yields on high-grade bonds have risen half a percentage point since the start of 2018, pushing up the cost of debt financing and lowering issuance overall. With average yields still close to unprecedented lows, companies are turning to debt markets to fund their acquisitions.

The extra yield investors demand to hold the debt over Treasuries widened to 1 percentage point on Friday as investors made way for the expected jumbo deal.

The pharmacy giant is selling fixed and floating-rate senior unsecured bonds in as many as nine parts, according to a person with knowledge of the matter. The longest portion of the offering, a 30-year security, may yield 2.15 percentage points above Treasuries, the person said, asking not to be identified as the details are private. CVS gathered $49 billion in bridge loans from 20 lenders in December as temporary financing for the acquisition, setting up for Tuesday’s transaction.

CVS is targeting as much as $44.8 billion of new debt, according to a Feb. 26 presentation.

The company is trying to win regulatory approval for its plan to buy Aetna, which will bring together around 10,000 CVS stores and Aetna’s 22 million customers. The deal is among the biggest health-care mergers of the past decade.